Do you remember a time before Money Market Reform (MMR)? It wasn’t that long ago when the new MMR regulations went into effect. Back then, the October 14 compliance deadline seemed a long way away. That’s not the case anymore.
With the deadline looming, people may be feeling anxious. You wouldn’t fault anyone for feeling apprehensive, especially when you consider the complexity of MMR and what the industry was tasked to accomplish.
So when nearly 75 industry people, all deeply immersed in MMR, recently came together, there were plenty of topics to ponder. Boston Financial and DST jointly hosted the two-day Town Hall event in Kansas City, which included mutual fund clients, broker-dealers, State Street Bank, the ICI, and the DTCC.
The speakers discussed communication and collaboration, status updates and system development, and pricing schedules and timing. Throughout the two days, there were additional conversations on topics ranging from intermediary preparedness, supporting fees and gates, and specific steps to transition from a constant NAV fund to a floating NAV fund.
Town Hall attendees frankly acknowledged that a lot of work still needs to be completed before October 14. Yet, there was also a feeling of strong optimism. In fact, the consensus from those in attendance was that through continued collaboration the October compliance date will be successfully met.
Additional insights and takeaways from the Town Hall include the following.
The Town Hall kicked off with a regulatory panel featuring Jane Heinrichs, Associate General Counsel for the ICI; Joanne Kane, Director-Operations & Transfer Agency for the ICI; and Jeff Cook, Director of Compliance at DST Systems, was the moderator.
Heinrichs and Kane shared their thoughts on several outstanding interpretive regulatory items and current trends in the industry, including asset movement within various money market products. Cook led a MMR SEC FAQ analysis. The discussion led to numerous questions from attendees, which was not surprising.
Heinrichs and Kane encouraged mutual fund firms to have discussions with their intermediaries on current and expected activities critical to MMR. To help facilitate this dialogue, Heinrichs and Kane provided participants with a list of implementation and operational consideration questions, compiled by the ICI BDAC/BTRAC Money Market Reform working groups. Also highlighted, were contributions from each of the four ICI working groups: 4 Decimal NAV Calculation, Intraday Processing, Fees & Gates, and Retail vs. Institutional.
Heinrichs and Kane also provided details regarding the ICI’s Money Market Reform Implementation Resource Center. The resource center, available to ICI members, provides valuable information on all aspects of MMR implementation, communication, and transition.
DTCC and NSCC Updates:
Attendees also received updates on the DTCC and NSCC MMR readiness efforts.
- The DTCC’s Money Market Reform Best Practices and User Guide will be published after May 30, and no later than June 30, 2016.
- Effective Tuesday, May 31, 2016, National Securities Clearing Corporation (NSCC) will implement enhancements to Mutual Fund Profile Service II. The enhancements will allow funds to communicate attributes including Money Market Fund Indicator, price strike times, and fund eligibility for fees and gates.
- In September, NSCC will implement enhancements to Fund/SERV, Networking, and Mutual Fund Profile Service I (MFPS I).
RELATED: Documentation available here.
Systems Development Perspective
From a system perspective, it’s clear that the new regulations have far-reaching impacts. And with so many enterprise clients in attendance, development status updates were a big draw for participants. Over the course of the MMR project, as many as 15 development teams from DST have been simultaneously engaged. New functionality for intraday pricing and processing was presented in demo format by DST, which for many attendees was the “star of the show.” The demos included real-time posting of intraday prices and transactions. It was beneficial for attendees to see firsthand the end-to-end flow of information.
As part of the second day lineup, Leo O’Donnell, Managing Director at State Street Bank, gave an update on daily pricing for FNAV Funds. O’Donnell shared a timeline that conveyed the complexity of managing this aspect of the new regulations. The visual detailed the myriad activities that need to occur within short timeframes during a single day in order to support multiple intraday price points. O’Donnell also discussed the impact to pricing schedules during an early market close or unexpected market close event.
These are just a few of the highlights from the two-day Town Hall event. As the Town Hall came to a close, attendees expressed not only an appreciation for the efforts expended by all up to this point, but also the continued collaboration that will take place over the remaining months.